Latin America Could Turn to Russia, China in Wake of Trade Split With US

The governments of some Latin American countries have signaled that they are ready to “break their dependence” on the United States; Russia and China could play a key role in the region, Venezuelan political analyst Ernesto Wong told Sputnik Mundo.

Chinese President Xi Jinping
In an interview with Sputnik Mundo, Venezuelan political analyst Ernesto Wong said that in Latin America, there are several factors which have given rise to the hope that this year will see a number of key political changes in the region.

One of these factors is the willingness of some regional governments to “break their dependence” on the United States and allow Russia and China to play a key role in the region, according to Wong.

“Latin America is at odds with Washington but it is developing friendly ties with China and Russia, which is why in 2017 the region is expected to overcome the imperialist dependence on the US and to establish more favorable conditions for exchange… trade and investment with Russia and China,” Wong said.

As for China, Wong referred to the January 20 meeting between Beijing and the Community of Latin American and Caribbean States (CELAC), which he said opened up new prospects for the exchange of public and private capital.

“It’s important that none of the countries of the Pacific Alliance decided to break off relations with China, which means that they are  interested in continuing trade ties with Beijing,” he said. The Pacific Alliance is a Latin American trade bloc which currently includes Chile, Colombia, Mexico and Peru.

According to Wong, the most important affecting the Pacific Alliance is the existence of Trump’s so-called model of “neo-isolation.” The alliance had been seen as a close partner of the United States and Canada; its members (less Colombia) were among the countries set to co-establish the Trans-Pacific Partnership (TPP) this month.

This initiative was nullified when Trump abandoned TPP on January 23. Trump also raised the question of revising the terms of the North American Free Trade Agreement (NAFTA).

“As a consumer, the US is in a critical situation after it greatly reduced its imports, which were supported by the free trade agreement. Trump wants to get out of it because he intends to develop national industry,” Wong said, adding that this process will also be affected by the critical situation in Western Europe.

Aside from to China and Russia, Latin American countries may also invest in Africa, according to Wong.

“This is potentially a good opportunity because openness toward Africa would help promote Latin American products there and the African continent would benefit from receiving equal conditions for exchange,” he said.

He added that such transparency would also be attractive for those countries in the region which are not progressive because they seek to improve relations with other regions, which could give them the opportunity to obtain a larger income.Wong emphasized that it is Latin America distancing itself from the United States and rapprochement between Eurasia and Latin America that will pave the way for regional countries becoming more independent and sovereign.

Article originally published here

China Seizes Opportunities in Latin America

chinese-dragonChina has big plans for Latin America—plans that seem to reflect China itself: massive and ambitious.

There are plans for a $10 billion, 3,300-mile-long transcontinental railroad snaking through the jungles of the Amazon river basin and over the highest mountain range in Latin America, linking the Atlantic shore to the Pacific. There’s talk of a $50 billion supersized canal carving a 161-mile-long swath across Nicaragua, offering passage to the megatankers of tomorrow and overwhelming even the newly expanded Panama Canal to its south.

There are more. Many more. These gargantuan projects are aimed at fueling China’s needs for resources and feeding South America’s need for energy and infrastructure. But geopolitics also play a role as China strives to make Latin America an economic partner, if not a counterpoint to the United States.

In fact, China’s investments in Latin America, from mining to massive hydroelectric dams, nuclear reactors and railroads, grew by 500 percent between 2000 and 2010, totaling nearly $100 billion, with another $250 billion in spending promised over the next decade. And while the U.S. still accounts for more than three times as much in trade and investment in the region, some analysts see disturbing signs in the steadily shifting balance.

In 2000, the Chinese portion of Latin American trade was about 2 percent. The U.S. share was 53 percent. Ten years later, the Chinese share was up to 11 percent and the U.S. portion was down to 39 percent.

“Clearly we are still the dominant player vis-à-vis them,” says Francisco Cerezo, the U.S. head of DLA Piper’s Latin America corporate group. “But it does speak to the trend. And I would be more concerned about the trend and making sure you right the ship and you focus on it properly.”

The past two decades of forays into Latin America come as part of China’s “go global” plan. Its first priority: raw resources to fuel its economic growth. China is heavily, and increasingly, dependent on imported oil. Its energy needs led it to offer some $65 billion in loans to Venezuela’s government in the last decade, according to the Washington nonprofit Inter-American Dialogue, along with direct investments in oil production and infrastructure there.

China also single-handedly accounts for nearly a fourth of the world’s copper demand, along with significant demand for tin and iron ore. “That’s why you see them coming into Latin America’s mining sector, which is huge,” says Jerry Brodsky, a partner and director of the Latin American practice group at Peckar & Abramson. “It’s perhaps the largest economic driver in Latin America’s mining.”

China gets much of its copper from Chile, while the China-based Chinalco Mining Corp. International put $3.5 billion into the Toromocho mine in Central Peru, giving it control of “the world’s second largest preproduction copper project, as measured by proved and probable copper ore reserves,” according to the company’s website.

Now China is reaching beyond resources. Its latest wave of investments involves massive infrastructure and energy projects.

The China Three Gorges Corp. has been rapidly acquiring hydroelectric dams in Brazil since 2013, paying nearly $4 billion in June to take over operation of two of the country’s largest dams, with a combined capacity to produce 5 gigawatts of electricity. That came just three months after China Three Gorges announced a proposal to build a new 8-gigawatt dam on the Tapajos River.

China’s State Grid Corp. is developing two transmission lines to deliver power from the Belo Monte dam in the Amazon basin. Last year, state-owned China National Nuclear Corp. signed a $15 billion deal to build Argentina’s fourth and fifth nuclear power plants, roughly doubling the amount of electricity generated by the country’s nuclear plants. Construction of the first of the new reactors, in cooperation with Argentina’s state-owned Nucleoeléctrica, is due to begin early next year.

These projects come on top of the nearly $42 billion that China invested in infrastructure in Latin America in just 2013 through 2015 alone. China is finishing construction of a space tracking, telemetry and command facility in Patagonia, Argentina, complete with a pair of maneuverable parabolic antennas, engineering facilities, and a $10 million electric power plant.

China Harbour Engineering teamed up with local partners to win the contract for Autopista Mar 2, a 152-mile motorway connecting four towns north of Medellin, Colombia. And, in May, it landed a $465 million road contract in Costa Rica.

“They’re providing what the specific markets need,” says Brodsky. “They follow the path of least resistance. Latin American needs infrastructure. Brazil has an insufficient production of local energy. So does Argentina. The road projects in Colombia are booming right now because for 30 or 40 years they spent all their money fighting the guerrillas, and they didn’t pay attention to their road infrastructure. So now there is an accelerated program in Colombia for road building.”

The nature of the projects also plays to China’s strengths. Despite its recent economic slowdown, China remains flush with money from its boom years. Combined with the technical expertise that it has built with domestic projects and industries, those deep pockets allow China’s state-owned companies to compete at a scale that few challengers can match.

“When you get to that level of megaprojects, there are not that many qualified bidders out there­—people that have not only the technical capacity but the financial capacity,” Brodsky says, adding that Chinese companies “have the money to self-fund a lot of their projects, and that makes them very competitive when it comes to bidding for big, large projects in Latin America.”

Abridged, original article published here

Meet Canada’s new International Trade Minister

francois-phillippe-champagneFrançois-Phillippe Champagne, a lawyer who’s worked for a string of major multinationals, Champagne knows the world of global trade—but says Canadians must reap the benefits at home.

Arguably the biggest promotion in today’s federal cabinet shuffle goes to François-Philippe Champagne, who vaults from parliamentary secretary to Finance Minister Bill Morneau, a supporting role just outside cabinet, to succeeding Chrystia Freeland in the high-profile post of minister of international trade.

I say “arguably” because an obvious case could be made that Freeland is, in fact, the key moving part in the shuffle. In taking over from Stéphane Dion as foreign minister, she notches up noticeably in prestige and profile. But Champagne, previously known only to attentive Ottawa insiders, in a single stride becomes an unignorable front-bench player for anyone watching federal politics.

This doesn’t come entirely as a surprise. Before he jumped into politics, Champagne held down serious jobs in international business. A lawyer, he was senior counsel and vice-president at ABB Group, a Swiss engineering giant, and then had a string of titles, including strategic development director, at AMEC, a big London-based project-management company focused on the energy sector. But he never hid his political ambitions, and returned to Shawinigan, Que., where he grew up (yes, in Jean Chrétien’s hometown) to win the Saint-Maurice-Champlain riding in the 2015 election.

Last month, before rumours of an imminent cabinet shuffle were much in the wind, I interviewed him at his office just off Parliament Hill. An upbeat, diminutive, and youthful 46, he riffed confidently on the challenges facing the Canadian economy.

And now that he’s taking over the trade portfolio, Champagne’s perspective on Canada’s position in the world economy is even more relevant. He sees plenty of room for improvement. For instance, he cited Australia and Britain as countries that do a better job selling themselves to international investors. Canada’s profile abroad is too often, he suggested, a fragmented one.

“I have been in a room in London where provinces were pitching against each other,” he said, recalling his days in the private sector. “I didn’t think, as a Canadian ex-pat, this really was the best way.” Champagne touted Morneau’s plan to create something called the Invest in Canada Hub, announced in last fall’s economic statement, as a step toward a “one-stop shopping” solution to marketing the national brand.

He argued the time is right for Canada to present itself more assertively, checking off the country’s selling points in an unsettled world. “Stability, predictability? Yes, you can see ahead. Rule of law? You know, if you build a plant here, 50 years from now it’s still going to be yours; you’re not going to have a change of regime. And you talk natural resources, low cost of electricity, fairly low cost of doing business, favourable tax rates.”

After Champagne waxed on for a while about Canada’s advantages as an open, trading economy, and a beacon for foreign investment, I asked if that vision remains politically viable in the era of Donald Trump and Brexit. Isn’t it likely that many Canadians, deep down, share the anxieties of English and American voters who responded last year to more protectionist, defensive rhetoric?

Champagne said that’s not what he hears in his own rural and small-town Quebec riding. He claims voters there, from truck drivers to lumber industry workers, tend to grasp that trade is essential to their livelihoods. But it’s crucial, he argued, for governments to make sure most people can see the benefits of liberal economic policy flowing their way.

So he cited measures from last spring’s budget, including the new Canada Child Benefit and the boost to the Guaranteed Income Supplement for lowest-income seniors. “People get it,” he said. “They see that, from the growth that we’re aspiring to achieve for the country, there is a piece of that for them.”

And he contrasted that with the discontent he noticed, back when he was based for five years in London, over how globalized trade and investment seemed to benefit only “a very discrete group” of the highly educated Brits. He added cautiously: “It’s not for me to talk about other countries, but I’m just talking from personal experience. You could see at some stage there was this imbalance.”

For Canada to avoid a Brexit-like backlash, the economy must keep generating wealth and spreading it around. Champagne agrees with economists who say that will be hard to sustain, since our workforce just isn’t expanding like it used to. “A lot of the growth in our country came after World War Two, with the influx of population from Europe, mainly. Then in the 1970s, women came to the workforce,” he said. “Now what we’re facing is that population in Canada is aging more than the world population.”

He said the federal policy response to the demographic crunch of more retired and few working-age Canadians can’t be merely incremental. “In an era of slow growth we need to have big, bold ideas,” he said. “We need to be ambitious.”

Up to now, Champagne has worked in Morneau’s shadow, helping develop policy ideas like the finance minister’s infrastructure bank and investment hub. Freeland showed, when she was finalizing Canada’s trade deal with the European Union, how a trade minister can make a mark—and secure a cabinet promotion. Now, Trudeau is giving Champagne his chance, and Ottawa has a key new player to watch.

Article originally published here

Non-Tariff Barriers Can Connect Trade to Sustainable Development

flagsIn the landscape of the 2030 Agenda for Sustainable Development, trade is a means of implementation towards the Sustainable Development Goals (SDGs). The Addis Ababa Action Agenda (AAAA) on financing for development further specifies the role of trade as “an engine for inclusive growth and poverty reduction, and contributes to the promotion of sustainable development.” That is, trade should function as a means for achieving “sustained, inclusive and sustainable” economic growth. More importantly, trade-led growth should enhance, rather than undermine, the potential for social development and environmental sustainability.

In the past several decades, however, many developing countries witnessed that trade growth contributed to aggregate economic growth, and also increased the within-country income inequality. This would suggest that a country’s trade policy reflects the interests of the country’s economic giants rather than small and marginalized players, and that these interests can override the importance of conservation of natural resources and ecosystems.

There is a need to rethink policymaking in order to link trade growth to sustainable development, including its social and the environmental dimensions. The recent UNCTAD report, ‘Trading into Sustainable Development: Trade, Market Access and Sustainable Development Goals,’ looks into this issue, focusing on the interactions between market access conditions – such as customs duties (tariffs) and non-tariff measures (NTMs) – and achieving the SDGs.

What are non-tariff measures?

Historically, market access conditions in international markets were determined by the level of tariffs on imported products. However, tariff barriers have fallen significantly across countries: the trade-weighted average tariff rate in the world fell from just over 5% in 1995 to 2.5% in 2014/2015. Against the trends of falling tariffs, the influence of NTMs upon trade costs has increased. In 2014, around 70% of agricultural products traded in the world market faced sanitary and phytosanitary (SPS) measures, and over 60% of manufactured products faced “technical barriers to trade (TBT),” such as technical regulations and product standards.

Such regulatory measures are designed to meet important social and/or environmental objectives, such as by setting maximum levels for toxic residues in food, ensuring the sustainable sourcing of natural resources, or limiting trade in polluting substances. But they can directly affect trade flows and economic development when they are applied to imported products. In many cases, NTMs can be more trade-restricting that tariffs. UNCTAD estimates that existence of SPS measures to agricultural exports may increase production cost by 22%, compared to the average tariff facing the same exports at around 5%. NTMs can be particularly restrictive for low-income countries constrained by limited capacity to comply with NTMs thus significantly increasing their trading costs.

Because the vast majority of NTMs directly target key determinants of sustainable development, such as food security, health and environmental protection, countries are likely to implement more such measures for the achievement of the SDGs. That is, the number of NTMs in world trade may be increasing fast.

How to make non-tariff measures work for sustainable development

Will an increase in NTMs squeeze low-income countries’ capacity to use trade as a means of implementation of the SDGs? Not necessarily. In fact, the presence of NTMs can be the source of regional or international collaboration that can help countries to achieve a win-win situation: (i) collectively improve policy environment towards achieving the SDGs; and (ii) reduce trade distortionary impact of NTMs. The key is to eliminate trade-distortionary effect of NTMs.

Trade distortions arise from NTMs when they increase production costs for exporting countries to meet the regulatory requirements, including the costs associated with conformity assessment and certification. These costs will be higher when exporters have to meet different requirements for different markets including domestic market. That is, NTMs can be trade-distorting when the “regulatory distance” between an exporting country and its market countries is large. Therefore, reducing the regulatory distance among trade partners is the way to achieve the win-win situation.

Regulatory distance between countries is measured by the similarity of regulatory patterns of NTM types applied to a specific product classified at the HS 6-digit level. For example, if two countries each apply ten different product requirements to lemons, the regulatory distance is huge and it increases trade costs significantly. UNCTAD has assessed the potential impact of reducing costs related to NTMs in the 15 member countries of the Southern African Development Community. The gains amount to US$6 billion through a 25% reduction of NTM-related trade costs. No member country is worse off from the reforms. The largest gains stem from reducing the restrictiveness of SPS measures and TBT for partners from the whole world through alignment with international standards. In the case where barriers to trade from NTMs are reduced only to SADC exporters, the gains are much lower, with a total of about US$1.3 billion.

Moreover, when regulatory convergence is achieved among countries, it implies that countries will be implementing policy measures in a manner coherent with their trading partners. Such collaboration can jointly improve the effectiveness of policy measures, particularly in the areas where policy impacts can be cross-border, such as environmental regulations.

NTMs provide an important “policy interface” between the SDGs and trade, particularly in the framework of regional economic cooperation among developing countries.

Article originally published here

IDB Approved Billions for Caribbean Projects in 2016

caribbean_mapThe Inter-American Development Bank (IDB) says it had provided US$11.7 billion for various projects in Latin America and the Caribbean in 2016.

The Washington-based financial institution said funds were also provided by its subsidiary Inter-American Investment Corporation (IIC).

“Between the IDB and the IIC, disbursements exceeded US$9.6 billion during the year, confirming the IDB Group’s role as the region’s leading source of multilateral financing,” the IDB said in a statement.

It said both the approvals and the disbursements were “in line with the priorities set by the IDB Group’s 48 member countries, such as ensuring that at least 35 per cent of the new financing goes to the region’s smallest and least developed economies”.

The IDB said 2016 was the first full year of operations of the renewed IIC, which is now in charge of the IDB Group’s non-sovereign guaranteed operations.

During 2016, the IDB said the IIC approved a total of 153 deals for US$2.26 billion, of which 100 corresponded to the Trade Facility (US$457 million).

Of the larger transactions, the IDB said 41 per cent went to infrastructure projects, 40 per cent to financial institutions and 19 per cent to corporate financing deals.

The IDB-led sovereign guaranteed operations went to state modernisation projects (33 per cent), infrastructure and energy (30 per cent), social programmes (24 per cent), climate change (12 per cent) and trade and integration (One per cent).

During 2016, the IDB said its group continued to implement administrative cost controls that it had put in place last year, “reflecting the austerity policies adopted by many of its member countries”.

Article originally published here

Why China is Cosying up to Latin America

china-lac-373x300Just days after Donald Trump’s victory in the US election, President Xi Jinping (習近平) set off for Latin America – his third trip to the region since taking office in early 2013. Beijing has laid out a new road…

BY CARY HUANG

Beijing has laid out a new road map for its relations with Latin American and Caribbean countries in a strategic push to expand its clout on the continent.

China’s growing interest in Latin America is raising many questions in the West, especially in the United States, which has considered the region its backyard since it adopted the Monroe Doctrine in the 1820s. That doctrine states US opposition to any outside intervention in North or South American affairs – and says any such action will be viewed as “the manifestation of an unfriendly disposition towards the United States”.

This closer engagement with Latin American countries coincides with a US president-elect who has vowed to scrap regional trade deals, build a wall on the Mexico border and deport undocumented immigrants.

But it’s an engagement that has caused business to boom. Trade between China and Latin America and the Caribbean multiplied by 22 times between 2000 and 2013, reaching US$236.5 billion in 2015. In 2014, China overtook the European Union to become the region’s second largest trading partner after the US.

The following year, Beijing signed a slew of agreements with Latin American countries promising to double bilateral trade to US$500 billion and increase the total stock of investment between them from less than US$100 billion to US$250 billion within ten years.

China sees its relationship with these countries as primarily economic rather than political or ideological.

Economically, China aims to diversify the sources of energy and materials for its manufacturing-centred economy. It also aims to find new markets for the country’s industrial overcapacity.

But its rising economic influence will inevitably come at Washington’s expense. In 2000, China’s share of Latin American trade was 2 per cent, compared to the US’ share of 53 per cent. By 2010, China’s share had grown to 11 per cent, while the US’ had dropped to 39 per cent.

China is also using its economic clout to win diplomatic allies and challenge US supremacy and its dominance in the region. Beijing is intent on making friends in the US’ historical sphere of influence to match America’s allies in East and Southeast Asia. The diplomatic offensive is part of a larger plan to make China a world-class power under Xi’s “Chinese dream” of national rejuvenation. Xi also wants to turn China into a maritime force, capable of projecting power, both soft and military.

Beijing might also be trying to target Taiwan. Of the self-ruled island’s 22 allies, 12 are in South America, and cross-strait relations have become decidedly chilled since Tsai Ing-wen of the independence-leaning Democratic Progressive Party took office in May.

Nevertheless, the debate in Washington will focus on whether China’s growing clout will undermine American diplomacy in the region, as it runs counter to the Monroe Doctrine. Anyone suspicious of China’s ambitions might point to America’s own history. A little more than a century ago, the US’ construction of the Panama Canal heralded the advent of a new era of American dominance. Now China looks to be doing the same with its work on a 270km Nicaraguan canal that will one day rival the Panama route.

Historically (post-Mao) China’s leadership has eschewed interventionist diplomacy. But the leadership is shifting that policy and it is possible Latin America will become the stage for a showdown between the world’s greatest superpower and a fast-rising one. ■

Article originally published here